By Staff, The Canadian Press, metronews. ca, November 27, 2014
C.D. Howe Institute. A revamp of Canada’s system would create fairness, argues paper’s author
Ottawa – A new research paper for the C.D. Howe Institute says Canada can help combat rising income inequality by taxing people separately for their paycheque and investment income.
The paper’s author says applying a flat rate on investment income would create fairness by closing legal, taxation-avoiding tactics – mostly used by higher-income earners.
Kevin Milligan of the University of British Columbia also recommends adding a tax bracket for annual incomes of $250,000, and perhaps another one at $400,000.
Milligan says the changes could open the door to other reforms on consumption taxes, environmental taxes and corporate taxes – which could help promote economic growth.
He says Canada’s income-inequality gap has widened considerably over the past 30 years, even though it hasn’t kept pace with the divide in the United States.
“We need to look seriously at a number of tax reforms that would improve the efficiency of our economy and provide a better environment for investment to provide the jobs for the future.” Kevin Milligan, a fellow in-residence for the C.D. Howe think-tank, in an interview.
Rich Get Richer: 150%
Still, he says over that period Canadians in the top 0.01 percent of earners have seen their incomes rise by 150 percent, while those in the bottom 90 percent have only seen eight percent growth.
Canada’s tax system, Milligan added, was developed in the 1960s and no longer fits today’s economic reality. “What’s interesting is our tax system hasn’t responded at all to that very large change in the distribution of income,” Milligan, also a fellow-in-residence for the C.D. Howe think-tank, said in an interview.
“We need to look seriously at a number of tax reforms that would improve the efficiency of our economy and provide a better environment for investment to provide the jobs for the future.” The Canadian Press
Our Comment
This news item really makes you think!
If a flat tax rate on investment income would close “legal taxation-avoiding tactics” – wouldn’t a progressive tax rate do the same? And wouldn’t that be more fair? By the way, why have we ever tolerated “legal taxation avoiding tactics” in the first place?
It’s gratifying that the C.D. Howe is concerned about the growing inequality in Canada. However, the emphasis on “[improving] the efficiency of our economy and [providing] a better environment for investment to provide the jobs for the future” is a rather worn neoliberal theme.
Nor does the tax system alone account for inequality. We need to examine other policies implemented over the last three decades, to understand the problem.
The C.D. Howe research paper might be a good stimulant to fruitful national and parliamentary debate on these and other pertinent matters, between now and the next federal election.
Élan
